It's been said that "water is an attorney's best friend." When we look at our growing caseload of claims involving leaking buildings the maxim certainly rings true. More than a small amount of this water-related defect litigation explosion deals with Exterior Insulation and Finish Systems — EIFS. This column explores some of the practical and legal issues surrounding EIFS litigation.
EIFS, sometimes called synthetic stucco, or by the brand name Dryvit®, is a wall cladding system developed in Europe more than twenty years ago. The product was and is widely hailed as an innovative, and relatively inexpensive, approach to exterior architectural finish. It is lightweight, easy to shape and color, and can provide an additional thermal barrier in colder climates. Unfortunately, many versions of the product sold before 1998 have a problem — if water gets behind the EIFS it can't get out. We have seen entire walls, including studs and plywood sheathing, "nuked out" by mold, mildew, and dry rot after only a year or two behind an improperly designed or constructed EIFS-clad building. Such experiences are becoming more and more prevalent throughout the country, with class action lawsuits and multi-million dollar settlements hitting the news in the south, southwest, and California.
EIFS products are marketed and sold as proprietary systems by individual manufacturers. Installers of EIFS are licensed by the manufacturers to install their particular product — although one applicator can be licensed by more than one manufacturer. EIFS is only part of the complete weather envelope for a building. EIFS installations are joined together, and penetrated, by other non-proprietary components.
In construction defects litigation the devil is in the details, and it is the details of the weather envelopes that create the difficulties with EIFS cases. In the typical situation, the owner or developer hires a design professional to design the project. The owner then awards a construction contract, and the contractor builds the building according to the drawings and specifications. The owner warrants the habitability of the structure to the end user — a condominium owner, for example. The rule of law, with few exceptions, is that the owner warrants that the drawings and specifications are virtually "perfect," and if the contractor adheres to the design the project will perform its intended purpose. As a result, when the building starts to leak the owner/developer can be caught between the end user of the building, the contractor, and the design professional.
The contractor will claim that the leaks result from a defective design. The design professional has the duty to design a building envelope that allows all components to work together in a complementary fashion. The design professional will counter that there is nothing wrong with the design, that the contractor installed the system incorrectly, or used defective components. The end user will say it doesn't matter who is at fault, he or she just wants a building that works. Everybody will be pointing fingers at the EIFS manufacturer, and the EIFS manufacturer will be pointing back.
If it turns out that the fault lay in the design, the owner/developer is often put in a very uncomfortable place. Even though the owner/developer relied upon the design professional when it "guaranteed" the design to the contractor and warranted the habitability to the end user, the owner/developer may not be able to look to the designer for relief because, in almost all cases, the design professional is obligated only to use the degree of skill and diligence normally employed by others performing the same type of services in the same geographical area at the time the services were performed. The design professional usually does not guarantee its work.
Nor in these situations can the owner/developer always look to the contractor. The contractor's only duty is to conform to the drawings and specifications. If it follows the design, failures are not its fault. If this isn't enough, the owner/developer may also be subject to potential sanctions under the Fair Trade Practices Act.
Finally, and often most importantly, insurance coverage of the different players — end user, owner/developer, design professional, contractor, subcontractors, and suppliers — are very different. As repairs and consequential damages from the defects are often very expensive, insurance is usually a very large factor in these cases.
EIFS buildings add another layer of complexity to this already baffling mixture of legal issues. EIFS wall cladding materials are systems that serve as building materials for exterior walls. In that regard they are no different from other exterior wall systems, like brick, stucco, or wood siding. They are intended to be incorporated with other building materials and products into an exterior wall that is field assembled. The system is comprised of many different components, however. EIFS is made up of adhesive, reinforcing mesh, expanded foam board, and a base coat mixture. The EIFS manufacturer provides instructions for the mixing and application of the EIFS system, and the licensed applicator installs it. Other components are created by other manufacturers, and are usually installed by others. These components may include the studs or other base wall assembly, substrate, sealants, backer rods, sealant primers, windows, doors, flashing, roof assembly, etc. If, as often happens, leaks occur around the windows, who or what is at fault? Is it the EIFS installer? Is it the window installer? Is it the window itself? Is it the design of the interface between the window and the EIFS? If so, is the design inherently defective (such that any design professional in the community would have done it the same way so there is no negligence), or did this design professional simply screw up? Are the details in the drawings and specifications complete, and if not, should the contractor have asked for more direction or simply followed "standard practice?" What if "standard practice" will almost always lead to leaks? Is the EIFS at fault because it does not provide a ready avenue for the (inevitable) leaking to be carried away? And what about the fact that many EIFS manufacturers feel compelled to litigate every claim — much like the tobacco companies used to do — just to avoid being put out of business by an avalanche of lawsuits? Finally, which insurer provides coverage, and what is excluded from that coverage?
The bottom line is that construction defects litigation, especially when it involves EIFS, is extremely complicated — with factual issues, legal issues, insurance coverage, and matters of economic survival playing varying roles throughout. No wonder they say, "water is an attorney's best friend."
This article is intended to inform the reader of general legal principles applicable to the subject area. It is not intended to provide legal advice regarding specific problems or circumstances. Readers should consult with competent counsel with regard to specific situations. For more information on this topic, please contact marketing@jordanramis.com or call (888) 598-7070.
